Powering Finance Through the Winter

This article appears in our Q3 2022 issue of Finance Transformation Magazine. To download the issue, click here

Mark Saywell, Consulting Managing Director from Finance Transformation associates, Nurxure, looks to ignite discussion on one of the biggest geopolitical threats facing British businesses this winter. The threat of power shortages, outages or rationing.

As a technology focused consultancy, most of our conversations centre on the delivery of new systems, or digitalisation of our clients' outputs and outcomes. However, sometimes we're required to revert to more basic concepts, and help our clients understand that delivery of major business processes may require a more basic approach, and manual facilitation.

The pandemic introduced a business continuity headache in terms of enabling productivity whilst suppressing viral transmission. There was a small and rapid boom in the delivery of urgent technology upgrades and improvements. Many businesses made huge strides forward delivering remote working practices, upgrading IT systems and solutions, and revising their HR rules to facilitate flexibility in working hours, locations, and behaviours.

Business leaders had started to enjoy some relative stability in the post pandemic world, and the next existential threat starts to emerge over the horizon requiring tactical planning and adjustment - a global energy crisis.

Alex Lawson and Rowena Mason recently wrote for the Guardian, highlighting the government's 'reasonable worst-case scenario' and suggested that the country could face blackouts across several days in January.

This is exacerbated by the projection of gas shortages in Norway, the UK's primary supplier, and the likely decision by the Norwegian government to prioritise supplies to their own populace. Only this week, there have been several assurances from Prime Minister Liz Truss that there will be no rationing nor blackouts in the UK this winter.

However, these words are delivered against a backdrop of broken promises and U-turns within this parliamentary term and perhaps more troubling, against actions that belie the message with growing anti-interventionist stances and the suppression of messages to promote energy saving measures to domestic users.

If your business does not already have access to local back-up generators, renewable energy, or storage solutions, you are unlikely to have the time to change that before winter. What might this mean?

Nationwide energy blackouts could see full communication outages for a spell of time. No internet, no mobile communications and in the very worst cases, as seen in the aftermath of Hurricane Ian in Florida, sustained downtime on landlines.

Advanced notice of outages, rationing or shortages will be invaluable to enable business planning but against the current backdrop of news flow, what forward notice are we likely to receive?

Sustained power outages could lead to considerable adverse impacts on business processing. If you don't have a section in your Business Continuity Plan addressing this, is now the time to consider it? It's neither feasible nor practicable that I could deliver you an exhaustive risk assessment in a short article, but I can highlight some areas of impact that you may wish to give some additional focus.

Accounts Receivable

If you suffer against challenging DSO or are heavily dependent on a small number of customers for your cash flow, you may wish to consider some additional measures to secure your income in the event of widescale electronic payments failures.

· Can you have open conversations with major customers and secure interim shorter payment terms throughout the winter?

· Is it possible to agree a backup process to use manual payments (cheque payments) with your customers in the event of a potential long term network outage?

· Should you consider maintaining manual records of higher value outstanding invoices to enable dunning in the event of system outages and help maintain cash flow?

Accounts Payable

Have you secured your own cash flow to allow yourself to pay your liabilities? How responsible are you as a customer? Do you have any smaller or critical suppliers that depend on you for their own existence?

· Perhaps larger dependent suppliers and critical liabilities could be recorded manually and monitored in case of a need to facilitate emergency or manual payments?

· Do you perform sufficiently frequent payment runs? Do you have scope to run more frequent, smaller payment runs to keep exposure and risk in check, especially for more vulnerable suppliers?

· Could you initiate an open conversation with critical and dependent suppliers to define their risk profile?

· Are you able to pay ahead of payment terms for the short term, to reduce the risks of late payment?

· Do you have access to manual payment methods such as cheque payment as a short term backup in the event of electronic payment challenges?

Employee Relations

Amidst a cost-of-living crisis, your employees are highly unlikely to be able to sustain even a short-term delay in salary payment and expenses reimbursement. Are you able to maintain manual back up procedures, or reduce the risk of payroll failure?

· Do you have manual records of staff and salaries and the ability to make manual payments?

· Is there a feasible means to implement a short term increase in the frequency of payroll? For example, reduce the risk and exposure of a monthly payroll run failure, with an interim move to fortnightly or weekly payments throughout the winter?

Ways of Working

How do you balance employee productivity against their availability when circumstances outside of their control restrict their offer of labour?

· Can you agree short term flexibility on use of holiday and unpaid leave?

· Is it possible to leverage similar flexible working as was deployed in the pandemic, with staff agreeing to provide labour based on the availability of power?

· Do you have manual, back up means of executing core business processes (proformas, paper invoices etc), that employees are trained in the use of, and can be caught up electronically when circumstances allow?

This article hasn't been written to promote fear, but to encourage thought and discussion. We live in an ever more technology and electricity dependent world and we face an energy risk that we've not had to consider for almost 50 years. There remain far more questions than answers, but it might just be time to prepare for the worst whilst hoping for the best.

If you feel you have a need for a power outage Continuity Plan and lack the in-house experience, the team at Finance Transformation UK would be happy to chat, brainstorm and structure your thoughts into a meaningful risk assessment and provide recommendations for areas of focus.

About the author: Mark Saywell

Mark Saywell is a Business Transformation Director with Nurxure and has over 20 years' experience advising, supporting, and implementing business systems to large corporations, SMEs and start-ups.